A political subdivision does not waive immunity from suit when it enters into a contract except as provided by section 271.152 of the local government code.[2] See Tex. Local Gov't Code Ann. § 271.152.

Section 271.152 waives immunity from suit to adjudicate a claim for breach of contract for a local governmental entity authorized by statute or the constitution to enter into a contract. See id. A "local government entity" is a political subdivision of the State, including a municipality. See id. § 271.151(3). Accordingly, under section 271.152, political subdivisions that enter into contracts "subject to this subchapter waive[ ] sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract." Id. § 271.152; see also Tooke, 197 S.W.3d at 344-45. Contracts subject to the waiver include only "written contract[s] stating the essential terms of the agreement for providing goods or services to the local governmental entity that [are] properly executed on behalf of the local government entity." Tex. Local Gov't Code Ann. § 271.151(2). To the extent "sovereign immunity" was not waived before the effective date of the 2005 amendments to the statute, the waiver of "sovereign immunity" applies retroactively for sections 271.152-.154. See id. §§ 271.152-.154; McMahon Contracting, 197 S.W.3d at 387; Tooke, 192 S.W.3d at 344-45.

In the context of a claim for breach of contract, the legislature must have waived immunity from suit as to the claim in question by clear and unambiguous language for immunity to be waived. See Tex. Gov't Code Ann. § 311.034 (Vernon Supp. 2008) (providing that a statute shall not be construed as a waiver of sovereign immunity unless the waiver is effected by clear and unambiguous language); Tooke, 197 S.W.3d at 332-33 (requiring clear and unambiguous language to waive governmental immunity).

Section 271.152 provides:

A local government entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.

Tex. Loc. Gov't Code Ann. § 271.152 (Vernon 2005). A contract subject to section 271.152 is defined as "a written contract stating the essential terms of the agreement for providing goods or services to the local government entity that is properly executed on behalf of the local government entity." (6) Tex. Loc. Gov't Code Ann. § 271.151(2) (Vernon 2005).

Our primary goal in interpreting a statute is to determine and effectuate the legislature's intent in promulgating the statute. In re Canales, 52 S.W.3d 698, 702 (Tex. 2001). When a statute is clear and unambiguous, we discern the legislature's intent by giving the words in the statute their plain and common meaning and by giving effect to all of the statute's terms. Mueller v. Beamalloy, Inc., 994 S.W.2d 855, 860 (Tex. App.--Houston [1st Dist.] 1999, no pet.) (citing Tex. Gov't Code Ann. § 311.021 (Vernon 2005)). In construing statutes as a whole, we consider all provisions of an act and decline interpretations that produce absurd results or render terms meaningless. Id.

East Houston argues that its agreement with the City provided for East Houston to provide the service of rehabilitating the apartment complex and providing very low-income and low-income housing for City residents and for the City to release to it all of the funds allocated by the loan agreement. The City argues that the agreement between itself and East Houston was a loan agreement that does not require East Houston to provide anything that could be construed as a service to the City.

East Houston argues that because the terms of the loan agreement and the restrictive covenants restricted the amount of rent it could charge for a portion of its units for a period of years, it was providing low-income housing as a service to the City. East Houston cites Ben Bolt-Palito Blanco Consol. Indep. Sch. Dist. v. Tex. Political Subdivisions Prop./Cas. Joint Self-Insurance Fund, 212 S.W.3d 320 (Tex. 2006) and Clear Lake City Water Auth. v. Friendswood Dev. Co., 256 S.W.3d 735 (Tex. App.--Houston [14th Dist.] 2008, pet. dism'd) in support of its argument. In Ben Bolt, the school district sued the joint self-insurance fund for a declaratory judgment on coverage for property loss, and the fund claimed immunity from suit. Ben Bolt, 212 S.W.3d at 322-23. The fund argued that its insurance contract with Ben Bolt was not a contract subject to section 271.152 because no goods or services were provided to the Fund. In finding that the fund's immunity from suit was waived under section 271.152, the Ben Bolt court held:

It is true that Ben Bolt is a consumer of insurance that the Fund offers. But the relationship between the Fund and its members differs from the ordinary consumer/seller relationship. As the Fund has acknowledged, its members elect a governing board, and a board subcommittee resolves claims disputes. To that extent, at least, the Fund's members provide services to the Fund. Moreover, the statute's legislative history indicates that, by enacting section 271.152, the Legislature intended to loosen the immunity bar so "that all local governmental entities that have been given or are given the statutory authority to enter into contracts shall not be immune from suits arising from those contracts." House Comm. on Civil Practices, Bill Analysis, Tex. H.B. 2039, 79th Leg., R.S. (2005) (emphasis added). There is no indication that the Legislature intended to exclude self-insurance fund agreements from enforcement.

In Clear Lake, Friendswood Development Company filed a breach of contract action against the city water authority because the authority failed to place on the bond election ballot a proposal to pay for facilities constructed by the development company under the terms of the contract. Clear Lake, 256 S.W.3d at 739. The contract between the development company and the water authority specifically provided that the development company was developing land within the authority with the intention that the water authority would seek voter approval to pay for the construction and acquisition of the facilities constructed. Id. at 747. The Clear Lake court discussed the Texas Supreme Court's analysis in Ben Bolt and held:

If the school district's participation in the election of the fund's governing board was sufficient to constitute the provision of services in the insurance contract in Ben Bolt, then we conclude that Friendswood Development's agreement to hire third parties to construct the Facilities and to build the streets, roads, and bridges is likewise sufficient to constitute the provision of services to the Authority. Applying the Ben Bolt court's liberal construction of the applicable statute, we conclude that the Agreement is a written contract stating the essential terms of the agreement for providing services to the Authority for the construction of the Facilities as well as for the construction of streets, roads, and bridges in the Subdivision. Therefore, the Authority's immunity from suit for all claims for breach of the Agreement has been waived under section 271.152.

Clear Lake, 256 S.W.3d at 751 (internal citation omitted). We disagree that this case is controlled by Ben Bolt and Clear Lake.

The Loan Agreement between East Houston and the City defined the rights and obligations of the parties. The City thus agreed to disburse the federal funds to East Houston, subject to certain terms and conditions, as part of an inter-creditor agreement for the financing of the federal government community development program. Among the conditions was the requirement that 51% of East Houston's apartment units be available to very low-income and low-income families at the prescribed affordability rates. The federal loan was subject to an inter-creditor agreement pursuant to which Chase Bank agreed to loan additional funds to East Houston, and East Houston agreed to pay the money back. Both loans were secured by the private property for whose development the funds were provided in a municipally directed project. It is clear that, while the City would benefit in a general way from having East Houston's apartment units refurbished and from the availability of more housing for low-income families, nothing in the contract obligated East Houston to provide any municipal service directly to the City. The central purpose of the agreement between the City and East Houston was to facilitate a loan of money from the City's portion of federal funds and from private funds to a private entity for the purpose of renovating East Houston's empty apartment building. The City was thus a conduit of federal funds and a facilitator of the project, but no services were provided directly to the City. This is clearly not the type of "service" envisioned by section 271.152.

The plain meaning of the statute supports the conclusion that section 271.152 does not apply to contracts like the one at issue here, in which the benefit that the City would receive is an indirect, attenuated one. Section 271.152 is clearly limited as to which contracts fall under the waiver of immunity from suit. See Tex. Loc. Gov't Code Ann. § 271.151(2) (section 271.152 applies to "a written contract stating the essential terms of the agreement for providing goods or services to the local government entity that is properly executed on behalf of the local governmental entity"). If every contract that confers some attenuated benefit on a governmental entity constitutes a contract for a "service," the limitation of contracts covered by section 271.152 to "contract for goods or services provided to the entity" loses all meaning. Nothing in the statute nor in its legislative history supports such an interpretation. Had the legislature intended to waive immunity from liability for every contract participated in by the State, it could have done so. We must interpret the limitation as having some meaning. See Mueller, 994 S.W.2d at 860.

Furthermore, the Ben Bolt court looked to the special relationship between the parties to conclude that they provided mutual services to each other--Ben Bolt, a school district, provided board members to the fund, another state governmental entity, while the fund provided insurance coverage to Ben Bolt in exchange for premium payments. See Ben Bolt, 212 S.W.3d at 327. Likewise, the Clear Lake court followed the reasoning in Ben Bolt in determining that the development company had provided a service for the water authority in constructing streets, roads, and bridges. See Clear Lake, 256 S.W.3d at 751.

Here, the relationship between the parties is quite different. East Houston, a private citizen, and the City entered into a Loan Agreement in which the City agreed to loan East Houston federal community development funds received through the City's separate HOME Agreement with a federal funding agency for rehabilitation of East Houston's privately owned apartment building. The benefit of the funds received thus ran directly from the federal government and Chase Bank to East Houston, not to the City, and East Houston never contracted to provide any service directly to the City.

The underlying contract here is also of a different character than that of the contract in Ben Bolt. In Ben Bolt, the governmental entity whose immunity from suit was waived was involved in the proprietary function of providing insurance coverage. See Ben Bolt, 212 S.W.3d at 327; see also Temple, 189 S.W.3d at 821 (holding that selling insurance is proprietary function for which there is no immunity from suit for breach of contract claim); Gates, 704 S.W.2d at 738 (stating that "[c]ontracts made by municipal corporations in their proprietary capacity have been held to be governed by the same rules as contracts between individuals" and that city that contracts in its proprietary role is "clothed with the same authority and subject to the same liabilities as a private citizen"). Here, the City was involved in the governmental function of directing federal community development funds and private funds into local community development projects to further governmental policy.

In Tooke, the Texas Supreme Court discussed the importance of the legislature's control over waiver of immunity as a means of protecting state resources. See Tooke, 197 S.W.3d at 331-32 ("The [principle of sovereign immunity] remains firmly established, and as it has come to be applied to the various governmental entities in this State, an important purpose is pragmatic: to shield the public from the costs and consequences of improvident actions of their governments."). This consideration is even more significant in a situation like this, when the distribution of federal and private funds, but not municipal funds, to a private entity is involved to further public policy.

We conclude that the Loan Agreement that the City entered into with East Houston is not the type of contract covered by section 271.152's waiver of immunity from suit, and the City's immunity is not waived on that basis. (7) Therefore the trial court did not err in sustaining the City's plea to the jurisdiction.